Contractor hits 3.2% margin and predicts that more work will be won by bigger firms in future

An increasingly small number of contractors will win large jobs in the UK, according to Richard Gregory, chief executive of HBG.

Announcing that the UK arm of Dutch parent company Royal Bam Group has broken the £1bn turnover barrier, Gregory said the top of the market would consolidate over the next few years.

He said: “With the tendency for large framework deals it’s a question of whether you’re on them or not. We are, but medium-sized players may have to club together to survive.”

As part of its drive for larger deals, HBG has moved into more complex jobs and now has seven deals worth more than £100m on its books, as opposed to none four years ago.

Turnover at HBG was up 18.2% from £882m to £1bn in the year ended 31 December 2007. Pre-tax profit grew from £42m to 48.7m. This included £947m from its construction division, which posted a pre-tax profit of £30.2m. This equated to a margin of 3.2%, compared with an industry norm of about 1.9%.

Gregory said: “Margins are generally lower because of one or two problem jobs. We managed to avoid that situation in 2007.”

He said the effects of the credit crunch had not yet been felt, but that the situation could change in the early summer.

HBG’s property division disposed of seven commercial developments last August, which left the arm “well positioned in advance of credit squeeze”.

Royal Bam increased pre-tax profit 81% to £340m and praised HBG UK’s “excellent contribution”. Turnover was £7.1bn, up from £6.9bn.